Correlation Between GM and Deutsche Wohnen
Can any of the company-specific risk be diversified away by investing in both GM and Deutsche Wohnen at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining GM and Deutsche Wohnen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Deutsche Wohnen SE, you can compare the effects of market volatilities on GM and Deutsche Wohnen and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in GM with a short position of Deutsche Wohnen. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Deutsche Wohnen.
Diversification Opportunities for GM and Deutsche Wohnen
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Deutsche is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Deutsche Wohnen SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Wohnen SE and GM is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on General Motors are associated (or correlated) with Deutsche Wohnen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Wohnen SE has no effect on the direction of GM i.e., GM and Deutsche Wohnen go up and down completely randomly.
Pair Corralation between GM and Deutsche Wohnen
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.67 times more return on investment than Deutsche Wohnen. However, GM is 1.67 times more volatile than Deutsche Wohnen SE. It trades about 0.17 of its potential returns per unit of risk. Deutsche Wohnen SE is currently generating about 0.15 per unit of risk. If you would invest 5,076 in General Motors on September 1, 2024 and sell it today you would earn a total of 483.00 from holding General Motors or generate 9.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 91.3% |
| Values | Daily Returns |
General Motors vs. Deutsche Wohnen SE
Performance |
| Timeline |
| General Motors |
| Deutsche Wohnen SE |
GM and Deutsche Wohnen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Deutsche Wohnen
The main advantage of trading using opposite GM and Deutsche Wohnen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Deutsche Wohnen can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Deutsche Wohnen will offset losses from the drop in Deutsche Wohnen's long position.The idea behind General Motors and Deutsche Wohnen SE pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Deutsche Wohnen vs. Sun Hung Kai | Deutsche Wohnen vs. China Overseas Land | Deutsche Wohnen vs. Longfor Group Holdings | Deutsche Wohnen vs. Mitsui Fudosan Co |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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